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Cyprus offshore: Turkey turns up the heat

The prospects for monetising natural gas discovered off Cyprus have risen, but so has the geopolitical temperature

The Cyprus authorities can point to two positive aspects of the current offshore gas scene—and one negative one in the form of Turkey's moves to assert its authority in Cypriot waters. Tension is rising.

On the plus side for Cyprus, leading international oil companies (IOCs)—Eni, ExxonMobil, Total—are confident of finding more reserves; and a deal has been done that could eventually see Cypriot gas being monetised.

Noble Energy, Delek and Shell, partners in the Block 12 Aphrodite discovery (4.1tcf of gas in place), have reached an agreement amending their production-sharing contract (PSC) with the Cypriot government. The deal, in the consortium's favour, brings the PSC into line with those signed with other IOCs operating off Cyprus.

The agreement means an important step has been taken towards eventually transporting Aphrodite gas—discovered in 2011—by pipeline to Shell's Idku LNG plant in Egypt. This will be the first Cypriot gas to be brought ashore, probably by 2025.

Geopolitical concerns

But beginning to overshadow these positive prospects is concern about geopolitical issues, and specifically Turkish statements and actions on the subject of Cyprus' offshore waters. There is a wide chasm between the government of the Republic of Cyprus on the one side, and Turkey and the breakaway Turkish Republic of Northern Cyprus (TRNC) in the north of the island on the other. Turkey alone recognises the TRNC and has troops stationed there. Turkey and the Republic of Cyprus have no diplomatic relations.

Turkey and the TRNC do not recognise Cyprus' economic exclusion zone (EEZ), instead insisting that the Turkish continental shelf extends over parts of the sea claimed by the Cypriots. The view in Ankara and northern Cyprus is that the exploitation of hydrocarbons should await an agreement to reunite the island, so that the resources can be shared jointly by the Greek and Turkish Cypriot communities.

In one of the latest public statements on the issue, the TRNC president Mustafa Afkinci said the republic's government had refused the idea of a joint commission to cooperate on the search for gas. Instead, it had "continued with unilateral action. We have told them ‘if this is done this way, you leave no choice to Turkish Cyprus and Turkey but to act in the same way'." He added that the Cypriot government had no right to define the sovereignty of the sea off the island without consulting Turkish Cypriots.

Turkey and the TRNC do not enjoy international support on this. Backing for the Cypriot government has come from, among others, the US, the UK and the EU. Cyprus is also seeking to obtain international arrest warrants for the crew of Turkey's Fatih drillship, lying about 40 miles west of Cyprus.

But Turkey is not backing down. "Our activities in licensed and legal areas will continue without any delay, despite the statements of the Greek Cypriots and the threats of so-called arrest warrants," said Turkish energy minister Fatih Dönmez. "Turkey never surrenders to any threats, and it never will."

In February 2018, Turkish naval vessels prevented an Eni drilling ship from reaching its target in Block 3. Ankara has threatened similar action in future. Dönmez said the drillship Yavuz "will also begin its operations in the region when the preparations are completed".

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